AKRON, Ohio - In a strategic move to advance its Goodyear Forward transformation plan, The Goodyear Tire (NASDAQ:GT) & Rubber Company (NASDAQ: GT) has entered into a definitive agreement to divest its Dunlop brand assets in North America, Europe, and Oceania to Sumitomo Rubber Industries, Ltd. (TYO: 5110). The transaction, valued at approximately $701 million, encompasses the trademarks and certain intellectual property associated with the Dunlop brand for various tire categories.
The divestiture follows Goodyear’s strategic review and is intended to optimize the company’s brand portfolio and reduce leverage, aiming to drive shareholder value. According to Goodyear CEO Mark Stewart, the sale is a significant step in executing their transformation plan and enhancing focus on core brands. Sumitomo, a prominent player in the Automobile Components industry, brings a strong track record of financial stability, with InvestingPro data showing an impressive 33-year history of consistent dividend payments and a current yield of 3.32%.
Goodyear will receive $526 million for the Dunlop brand and associated intellectual property. Additionally, Sumitomo Rubber Industries will pay a $105 million transition fee to assist in the brand’s transition and purchase existing Dunlop tire inventory, estimated to yield approximately $70 million in proceeds, subject to adjustments. With annual revenue of $8.36 billion and a healthy current ratio of 1.91, Sumitomo demonstrates the financial capability to execute this significant acquisition. For detailed financial analysis and additional insights, investors can access more metrics through InvestingPro.
As part of the agreement, Goodyear will continue to manufacture and distribute Dunlop branded consumer tires in Europe until at least December 31, 2025, with the possibility of a one-year extension. During this period, Goodyear will pay royalties to SRI but will retain profits from these sales. Following this transition, Goodyear will supply Dunlop tires to SRI in Europe for five years under a Transition Offtake Agreement, with SRI committing to minimum purchase quantities.
Furthermore, Goodyear will license back the Dunlop trademarks for commercial (truck) tires in Europe and retain rights for the Dunlop motorcycle tire business in Europe and Oceania.
The transaction, expected to close by mid-2025, is subject to regulatory approvals and customary closing conditions. Goodyear plans to use the proceeds to reduce debt and fund initiatives within its transformation plan.
The sale is not anticipated to materially affect Goodyear’s segment operating income during the Transition License Agreement term. However, the company expects a reduction of about $65 million per year in segment operating income during the Transition Offtake Agreement term, not accounting for potential actions to improve operating margin or financial benefits from the transaction proceeds deployment.
This strategic divestiture is based on a press release statement and is pending regulatory approval and the satisfaction of other customary closing conditions.
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